'Peace Diamond' fetches $9.1 million

One of the world's largest diamonds has been sold for $US6.5 million ($A9.1 million) by Sierra Leone to fund local development projects, dealing a blow to smugglers in the West African nation.

The egg-sized, 709-carat diamond found by a Christian pastor was bought at auction in New York by Laurence Graff, a British billionaire and jeweller, according to the Rapaport Group, an international diamond trading network that handled the sale.

Of the proceeds of the stone dubbed the "Peace Diamond," the government will get 59 per cent or about $US3.9 million ($A5.5 million) in tax revenue to fund clean water, electricity, schools, health centres and roads, said Martin Rapaport of the Rapaport Group.

"As a government, particularly in Africa, it has always been the narration of corruption, and the mineral wealth is not benefiting the people", said Abdulai Bayraytay, a spokesman for Sierra Leone President Ernest Bai Koroma, at a news conference.

The auction marked the first time a diamond found in Sierra Leone was put up for public sale, and state officials said they hope it will be a step toward ending the illicit diamond trade.

Diamonds fueled civil war in Sierra Leone in the 1990s, when rebels forced civilians to mine the stones and bought weapons with the proceeds, leading to the term 'blood diamonds'.